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Archive / Investment Adviser (Level 2) / Basics of Insurance
nism-series-xb-occupational-extra-premium-hazardous-occupations[ INVESTMENT ADVISER (LEVEL 2) ]

How do life and disability insurance underwriters evaluate 'Occupational Hazards' (e.g. underground coal miners, commercial deep-sea divers, bomb disposal squad personnel)?

[ A ]By charging a specific 'Occupational Extra Premium Loading' (e.g. ₹3 to ₹10 extra per thousand sum assured) or imposing strict accidental death exclusions linked to hazardous occupational duties.[ CORRECT ]
[ B ]By offering a 50% cash discount on premiums.
[ C ]By cancelling the applicant's Aadhaar card.
[ D ]Underwriters are legally forced to ignore occupation in all proposals.
Takeaway

The correct answer is A: underwriters price occupational hazard risk by charging an Occupational Extra Premium loading per thousand sum assured, or by imposing exclusions on accidental death benefits tied directly to hazardous job duties.

Derivation
Actuarial pricing assumes mortality/morbidity rates consistent with the general insured population; occupations like underground mining, deep-sea diving or bomb disposal carry materially elevated statistical risk of death or disability arising specifically from job duties. Rather than declining such applicants outright, insurers price the additional risk explicitly -- a flat extra loading (commonly a few rupees per thousand of sum assured) added to the standard premium -- or restrict cover by excluding claims arising from hazardous on-duty activities specifically, while still covering non-occupational causes of death normally. This keeps the risk pool actuarially sound without denying coverage to hazardous-occupation applicants altogether.
Why the others fail
B — By offering a 50% cash discount on premiums.
Backwards; hazardous occupations attract an extra premium loading to reflect elevated risk, not a discount, which would invite adverse selection.
C — By cancelling the applicant's Aadhaar card.
Absurd and unrelated; occupational risk pricing has nothing to do with cancelling an applicant's identity documents such as Aadhaar.
D — Underwriters are legally forced to ignore occupation in all proposals.
False; occupation is a core, standard rating factor in life and disability underwriting, it is never legally required to be ignored.